Industry experts have voiced considerable skepticism regarding optimistic claims that American energy majors will quickly commit tens of billions of dollars to rebuild Venezuela's broken energy sector.
Requirement of Absolute Assurances
Without an absolute assurance of complete repayment from the Washington, specialists predict multinational oil companies to proceed with extreme caution.
“It is too early to comment on any potential investments,” a representative commented in response.
The ambitious schedule of less than a year and a half was publicly outlined. Nevertheless, expert analyses indicate a longer timeline.
A Likely Schedule
“Chances are going to take 36 months for any significant recovery in production,” noted an chief investment officer.
Experts believe oil companies would likely spend:
- Year one: Navigating new operating agreements.
- Year two: Investing in rebuilding of facilities.
- Year three: Reaching a position to meaningfully increase yield.
The result could be an rise of around half a million barrels per day perhaps by the end of the decade.
Desire Versus Readiness for Investment
Analysts draw a critical difference between companies' curiosity and their willingness to spend substantially.
“In my view their interest is an high score, on a scale of ten. I think their willingness is a four or five, because there is significant uncertainty yet.”
Veteran operators in the country echo this sentiment. The expectation is that firms will politically talk up the opportunity while actually proceeding with great care.
The Colossal Price Tag
The financial outlay would be colossal. Independent projections suggest that increasing production by between 500,000 and a million barrels per day would require over $10 billion in capital spending over two to three years.
However, returning output to peak levels of around 2.5 million bpd could require a monumental $80 billion to $90 billion over six or seven years.
The Pending Question of Government Backing
The prospect of firms being reimbursed by the federal government has been often floated. However, specific plans on any guarantee have so far not been announced.
The absence of certainty is the primary factor for the sector's hesitation. Companies seek safeguards against nationalization and the possibility that a subsequent government could refuse any agreement.
“It is essential to be insured against sovereign risk, that we’ve experienced in Venezuela before.”
Therefore, while political confidence runs high, the practical realities suggest a journey of slow deliberation for potential significant venture in the Venezuelan oil sector.
